Fleet Sports purchased a production machine with a cost of $180,000 at the beginning of 2019. Transportation costs to get the machine ready were $5,000. An additional $15,000 of labor costs were incurred to assemble the machine. The equipment has an estimated life of 10 years or 100,000 snowboards (units of product). The estimated residual value is $20,000. During 2019, 17,000 snowboards (units of product) were produced with this machinery. Determine the following, and show your work: What is the depreciation expense per unit of production using the units-of-production depreciation? What is the total depreciation expense at December 31, 2019, using units-of-production depreciation? What journal entry is needed at the end of 2019 to record depreciation expense using straight-line depreciation?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Fleet Sports purchased a production machine with a cost of $180,000 at the beginning of 2019. Transportation costs to get the machine ready were $5,000. An additional $15,000 of labor costs were incurred to assemble the machine.
The equipment has an estimated life of 10 years or 100,000 snowboards (units of product). The estimated residual value is $20,000. During 2019, 17,000 snowboards (units of product) were produced with this machinery.
Determine the following, and show your work:
What is the
What is the total depreciation expense at December 31, 2019, using units-of-production depreciation?
What
What is the book value of the equipment at the end of 2020 using straight-line depreciation?
What is depreciation expense for the equipment at the end of 2019 using double-declining balance depreciation?
What journal entry is needed at the end of 2020 to record depreciation expense using double-declining balance depreciation?
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